The Coalition has seized on weak economic figures from the ABS, reiterating their commitment to repealing the carbon tax if elected to government. The Federal Government has announced another $200 million injection into the Australian automotive sector, to help boost the flagging industry. It will also mandate that commonwealth agencies must have a 100 per cent target in buying locally produced cars in replacing their existing fleet.

Transcript

ELEANOR HALL: So stark economic numbers at any time at the start of an election campaign that the Prime Minster is making about who you trust to run the economy, how will this play politically?

Joining us now is our chief political correspondent, Sabra Lane.

Sabra, what are the political leaders making of this economic news?

SABRA LANE: Well Eleanor, no doubt the Prime Minister will be poring over some of this in the Cabinet meeting this morning, he is hosting a full Cabinet meeting here in Canberra. He did make a media appearance this morning on AM, underlying his points about the economy and saying that Labor is capable of steering the economy through the post mining production boom.

The Coalition though, says that this record is highly questionable, that the Coalition has a stable team, that it's been consistent and unchanged and is a complete contrast with the Government.

Now the Opposition Leader, Tony Abbott has started day one of the campaign by emphasising what the first act of an incoming Coalition government would be, and that is to get rid of the carbon tax. He's visited a business in Brisbane that he says has been affected by the carbon tax, the Coalition team, the Shadow Treasurer Joe Hockey was with him.

They've also seized on Virgin Australia's results posted before the Australian stock exchange this morning, pointing to a $100 million loss, highlighting that half of that cost has been due to the carbon tax.

So let's hear from Mr Abbott and Mr Hockey.

TONY ABBOTT: Today I've written to the head of the Department of Prime Minister in Cabinet to say that the first act of an incoming Coalition government, should we win the election, will be to prepare the carbon tax repeal legislation. And this will be the first item of business considered by an incoming parliament, it will be the first piece of legislation considered by a new parliament, should there be a change of government.

And repealing the carbon tax means that this plant alone will be $5 million a year more competitive. By the time this plant has paid its direct carbon tax costs, by the time this plant has paid a higher electricity and gas prices because of the carbon tax, it's up for $5 billion a year in costs that competitors simply don't face.

JOE HOCKEY: Virgin has just announced a full year loss of over $100 million, but they've also identified in their statement to the stock exchange that they have had a bill of $45-$50 million for the carbon taxes here, which they have been unable to recover because of weak market conditions. So the cyclical downside of the carbon tax is coming into play, and if you do not have profitable businesses, then a tax like the carbon tax eventually does cost jobs.

ELEANOR HALL: That's the Shadow Treasurer Joe Hockey and before him the Coalition Leader Tony Abbott, at that media conference this morning.

Sabra, the Government announced this morning that it would provide another $200 million to help boost the Australian automotive sector, is this an attempt to try to wedge the Coalition by highlighting the differences in taxpayer support for the industry being promised by Labor and the Coalition?

SABRA LANE: Look its partly to do with that, it give voters a straight compare and contrast exercise because the Coalition has previously said that it will take $500 million out of the new car fund.

But this specific deal is looking to give $200 million to help 200 associated businesses that depend on the big car manufacturers for work, so the Government argues that this a good package for jobs.

The Coalition however is highlighting the fact that the Government's recently just changing policy on fringe policies tax to do with cars, and that is having a huge impact on the automotive industry.

And Tony Abbott has had a bit to say about that this morning too.

TONY ABBOTT: Well the latest car industry rip-off is the $1.8 billion that the Government wants to take out of the car industry with the increase in fringe benefits tax on everyone who is driving an employer provided vehicle, and let's not forget that this is a hit on some very average wage earners.

If you're earning $50,000 a year as a charity worker for instance and you've got an employer provided car, that's a $1400 a year hit on you. If you're earning $70,000 a year as a nurse and you've got an employer provided car, that's a $2,000 a year hit on you.

But what this is doing is, it's stopping thousands of sales, the motor industry estimates that this $1.8 billion hit from this Government is going to reduce overall sales by 10 per cent and tragically, reduce the sales of Australian manufactured cars by 20 per cent. So we're going to get rid of that.

SABRA LANE: So that's Tony Abbott speaking there in Brisbane. Now back to the Governments policy that it's announced today, $200 million worth. Now the Industry and Innovation Minister Senator Kim Carr says this policy will also mandate that Commonwealth agencies will have to buy only locally produced cars to replace their existing fleet's heels. He also hopes that this policy is adopted by state and local governments.

I spoke with him earlier.

KIM CARR: We are committing to back the Australian motor industry because the Australian motor industry backs Australian jobs. And we think governments around Australia should back Australia. It's not such a big deal, one would think, that the governments local, state, federal buy Australian. Backing Australian jobs, produce, we produce very good quality cars in this country and there's really no excuse for buying imported cars when you've got high quality Australian cars available.

SABRA LANE: What do you think this will do to the sales of cars in Australia?

KIM CARR: Well we think that it's worth about 18,000 vehicles across industry and we believe this is an important measure to lift the number of vehicles being built in Australian factories. We want to ensure also support for our supply chain, there's about 200 companies involved in the Australian automotive industry, about 50,000 people directly employed, about 200,000 people indirectly employed.

So it's important that we are ensuring that Australian automotive workers have actually got product to build and that we're able to sell those cars in Australia.

SABRA LANE: That $18,000 figure, 18,000 car figure sorry, you're assuming that state governments and local governments are going to do the same thing as well or-

KIM CARR: That's what we're asking them and we're mandating the Australian agencies, the CSIRO, the Army, other agencies are able to buy Australian cars, in fact we're requiring them to buy Australian cars for their own purposes. And so we're also saying though that fleet sales providing assistance for business fleets, for community groups that buy fleet cars, also we want to encourage them to buy Australian, so that we can produce more vehicles in Australia.

SABRA LANE: What if those cars, manufacturers, aren't making the kind of vehicles that those departments want to buy. Because I mean, essentially, hasn't that been part of the problem here, is that the manufacturers haven't cottoned on to what consumers really want?

KIM CARR: No what we've got is a number of governments who are preferring to buy imported cars than back Australia. The Government for instance in New South Wales, for example, only 42 per cent of their fleet is Australian made. In Queensland it's 36 per cent. And of course you'll see in South Australia and in, in Victoria, much higher levels of Australian made cars, 75 per cent in those two states.

So I think it's the Australian made vehicles are high quality, high value for money, but it's important that our government procurement offices buy Australian. There really is no excuse for this, no excuse whatsoever.

The Australian cars are fuel efficient, Australian cars are high value, they're very, very safe vehicles. But it's time that people backed Australia.

SABRA LANE: But isn't it time, I mean Ford admitted that too when it talked about closing its operations in 2016, that, it hasn't been building the kind of cars that Australians want to buy.

KIM CARR: Well what we've got to do is, is we've got very fuel efficient vehicles that Ford is now producing, LPG vehicles, we're seeing diesel, we're seeing a number of other fuel options being produced by Ford; the fact is Ford stopped investing some while ago. And if you don't invest in Australian automotive industry the car companies will fold.

What we want to see is new investment to come into the industry, to get the new investment we need to get the demand up. and this is so it's very important in regard to what's happening in General Motors, and General Motors on Friday are having their workers coming together to make a decision about the future of the company, and they've had long, long history of working in these difficult times to making sure the decisions are made in the interest of the Australian automotive industry. And the interest in future jobs in Australia.

Toyota's been highly successful, Toyota produces high quality vehicles and they're still able to export them. Even in these very, very stiff times.

We've seen the dollar has had a big impact on Australian manufacturing. We know that the fragmentation of the Australian market as a result of a number of free trade agreements has had a big impact on Australian automotive manufacturing.

Now what we've gotta do is to find ways to encourage people to buy Australian. And that's what we're doing.

SABRA LANE: This new money comes after the backlash that the Federal Government's coping over the changes to fringe benefits tax. Aren't tax payers likely to think here, hang on, you're taking with one hand and giving back with the other?

KIM CARR: No what they'll say is we're closing a loop hole; a loop hole whereby people were able to use the taxation system to support the private use of motor cars. And we say that's not on, you can't do that.

You can't buy, largely imported cars, and use the tax payer to subsidies the private use of them, of the vehicle.

What we want to do is encourage people who have a legitimate business expenses to continue their claims, and that's the case we're doing at the moment. And once every five years you've got to fill in a log book for a few weeks, it's not exactly a hard ask.

But what is important is that when the Liberal Party says they're not going to go along with this measure you've gotta ask them, where's the money coming from? Where's the $1.8 billion gonna come from? This is on top of their position to take money out of the automotive industry, which would see the end of auto manufacturer in Australia.

SABRA LANE: No other sector in the Australian community receives the amount of Federal Government support that the automotive sector does-

KIM CARR: That's not true I'm sorry, that's just not true.

SABRA LANE: What other sectors get $5.4 billion?

KIM CARR: In agriculture there's more assistance. Oil and gas has very substantial assistance from the tax payer; it's just not true, those statements are just not true.

SABRA LANE: But small businesses thrive or die based on market forces, why shouldn't these other big industries-

KIM CARR: Small businesses are one of the beneficiaries of the automotive package. The sum of 200 companies in the automotive industry. I mean there are a lot of things said about why we support the automotive industry, and it starts with a simple proposition.

We support it because of how important the automotive industry is to the economy, for jobs, for high technologies, for the exports. Even exports in times like this. We support the automotive industry because it is central to the future of manufacturing in Australia. And so a lot of things are said from the inside of the bubble in Canberra about what the level of support is for various industries. It's simply not the case that the automotive industry is the only industry that gets support from the Australian government.